Intel to pay AMD $1.25 billion, settle all disputes

Intel said on Thursday it will pay AMD $1.25 billion as part of the settlement, sending shares of AMD up nearly 30 percent.

The two companies also sealed a five-year cross license deal and said they would give up any claims of breach from their previous license agreement.

Competition authorities in Asia, Europe and the United States have taken action against Intel in recent years because of persistent complaints by AMD about the behavior of Intel, which makes 80 percent of the central processing units at the heart of personal computers.

"While the relationship between the two companies has been difficult in the past, this agreement ends the legal disputes and enables the companies to focus all of our efforts on product innovation and development," AMD and Intel said in a joint statement.

AMD said it would drop all pending litigation including a case in U.S. District Court in Delaware and two cases pending in Japan. AMD will also withdraw all of its regulatory complaints worldwide.

As a result of the settlement, Intel adjusted its fourth-quarter outlook. The chip maker raised its spending forecast to $4.2 billion from $2.9 billion, and said its effective tax rate would be about 20 percent, down from 26 percent. Other expectations are unchanged, Intel said.

Shares of AMD jumped 23 percent to $6.55 in early trading on the New York Stock Exchange. Intel shares were halted.